You are here: / Contract Law
,

DATE OF LOSS DEEMED TO BE DATE THE CLAIM FOR A STOLEN CAR WAS DENIED, NOT THE DATE THE CAR WAS STOLEN (THIRD DEPT).

The Third Department, reversing Supreme Court, determined that the term “date of loss” in the policy referred to the date the insurer disclaimed coverage, not the date the car was stolen. Therefore plaintiff’s action for breach of contract was timely. The contract properly shortened the applicable statute of limitations to one year:

In our view, the generic “date of loss” language employed here, in the context of the policy as a whole, does not evince an unmistakable intention that the one-year limitations period be measured from the occurrence of the underlying event … . Significantly, in shortening the limitations period, the insurance policy did not use the term of art “inception of loss” or other similarly specific language indicating that the limitations period was to be measured from the event giving rise to the claim … . Moreover, although “date of loss” could be reasonably interpreted to mean the date of theft, as defendant contends, ambiguities in an insurance policy must be construed against the insurer … . In view of the foregoing, we hold that the one-year limitations period set forth in the insurance policy began to run on the date that defendant denied the claim for coverage … . Mercedes-Benz Fin. Servs. USA, LLC v Allstate Ins. Co., 2018 NY Slip Op 04064, Third Dept 6-7-18

INSURANCE LAW (DATE OF LOSS DEEMED TO BE DATE THE CLAIM FOR A STOLEN CAR WAS DENIED, NOT THE DATE THE CAR WAS STOLEN (THIRD DEPT))/CONTRACT LAW (INSURANCE LAW, DATE OF LOSS DEEMED TO BE DATE THE CLAIM FOR A STOLEN CAR WAS DENIED, NOT THE DATE THE CAR WAS STOLEN (THIRD DEPT))

, ,

PROVISION OF THE EDUCATION LAW WHICH ALLOWS THE APPOINTMENT OF A RECEIVER TO TAKE OVER ALLEGEDLY FAILING SCHOOLS DOES NOT VIOLATE THE CONTRACT CLAUSE OF THE US CONSTITUTION (THIRD DEPT).

The Third Department, in a complex decision not fully summarized here, determined the provision of the Education Law which allows the appointment of a receiver to take over allegedly failing schools does not violate the Contract Clause of the US Constitution:

… [W]here a statute or regulation impairs a private contract, courts will defer to a legislature’s rationale with regard to its necessity … . Less deference is warranted where the statute or regulation “is self-serving and impairs the obligations of [the state’s] own contracts” because “a [s]tate is not completely free to consider impairing the obligations of its own contracts on a par with other policy alternatives” … . Less deference may be warranted even where, as here, the state is not a party to an impaired public contract … . “[F]or an impairment to be reasonable and necessary under less deference scrutiny, it must be shown that the state did not (1) consider impairing the contracts on par with other policy alternatives or (2) impose a drastic impairment when an evident and more moderate course would serve its purpose equally well nor (3) act unreasonably in light of the surrounding circumstances” … .

Assuming without deciding that the less deferential standard applies, we find that Education Law § 211-f (8) is reasonable and necessary both on its face and as applied. In context, the receivership agreement was necessary in order to implement available methods to address the immediate issues that were facing the struggling or persistent struggling schools. The statute provides that the Superintendent must act in accordance with the existing CBA [collective bargaining agreement], and, where, as here, a receivership agreement is requested, the statute limits the scope of the agreement — and impairment. No modification or impairment can be unilaterally imposed but instead must be negotiated. As applied, although an agreement was not reached with regard to all issues, the modifications imposed were applicable to the affected schools only for the time limited by the statute. In sum, because the statute and the agreements apply prospectively and limit the scope, application and duration of any modifications to existing agreements, while prohibiting any adverse financial impact, we find that it was reasonably designed and necessary to further the goal of helping students to succeed … . Matter of Buffalo Teachers Fedn., Inc. v Elia, 2018 NY Slip Op 04061, Third Dept 6-7-18

EDUCATION-SCHOOL LAW (PROVISION OF THE EDUCATION LAW WHICH ALLOWS THE APPOINTMENT OF A RECEIVER TO TAKE OVER ALLEGEDLY FAILING SCHOOLS DOES NOT VIOLATE THE CONTRACT CLAUSE OF THE US CONSTITUTION (THIRD DEPT))/CONTRACT LAW (EDUCATION-SCHOOL LAW, CONSTITUTIONAL LAW, PROVISION OF THE EDUCATION LAW WHICH ALLOWS THE APPOINTMENT OF A RECEIVER TO TAKE OVER ALLEGEDLY FAILING SCHOOLS DOES NOT VIOLATE THE CONTRACT CLAUSE OF THE US CONSTITUTION (THIRD DEPT))/CONSTITUTIONAL LAW (EDUCATION-SCHOOL LAW, CONTRACT LAW, PROVISION OF THE EDUCATION LAW WHICH ALLOWS THE APPOINTMENT OF A RECEIVER TO TAKE OVER ALLEGEDLY FAILING SCHOOLS DOES NOT VIOLATE THE CONTRACT CLAUSE OF THE US CONSTITUTION (THIRD DEPT))/FAILING SCHOOLS (PROVISION OF THE EDUCATION LAW WHICH ALLOWS THE APPOINTMENT OF A RECEIVER TO TAKE OVER ALLEGEDLY FAILING SCHOOLS DOES NOT VIOLATE THE CONTRACT CLAUSE OF THE US CONSTITUTION (THIRD DEPT))/RECEIVERS (FAILING SCHOOLS, (PROVISION OF THE EDUCATION LAW WHICH ALLOWS THE APPOINTMENT OF A RECEIVER TO TAKE OVER ALLEGEDLY FAILING SCHOOLS DOES NOT VIOLATE THE CONTRACT CLAUSE OF THE US CONSTITUTION (THIRD DEPT))

QUESTION OF FACT WHETHER AN ORAL CONTRACT WAS FORMED (THIRD DEPT).

The Third Department, modifying Supreme Court, determined plaintiff had raised a question of fact whether there was an oral contract for dock space for and storage of plaintiff’s boat at defendant marina:

… [P]laintiff submitted a copy of an invoice from defendant that itemized the charges for winter storage and spring launch and showed that no balance was due in April 2008. The invoice also acknowledged receipt of a $500 payment from plaintiff on April 14, 2008 for a monthly slip charge. Plaintiff also submitted an affidavit in which he averred that the $500 payment accepted by defendant is evidence that the parties entered into an oral agreement for rental of dock space for the 2008 boating season. The facts alleged in plaintiff’s affidavit are consistent with his deposition testimony, which was submitted by defendant, in which he claimed that he made an oral agreement with defendant’s employee. Plaintiff’s argument that the oral agreement was consistent with the parties’ prior dealings because he had entered into a written agreement for only one season during his long period of occupancy is corroborated by [defendant’s] allegation that “[o]ver the years[, plaintiff] refused to sign any license agreement.” When viewed in the light most favorable to plaintiff, as the nonmoving party … , plaintiff’s submissions are sufficient to establish the existence of a triable issue of fact regarding formation of an oral contract. Carroll v Rondout Yacht Basin, Inc., 2018 NY Slip Op 04051, Third Dept 6-7-18

​CONTRACT LAW (QUESTION OF FACT WHETHER AN ORAL CONTRACT WAS FORMED (THIRD DEPT))/ORAL CONTRACTS (QUESTION OF FACT WHETHER AN ORAL CONTRACT WAS FORMED (THIRD DEPT))

,

HUSBAND ENTITLED TO REVOKE HIS CONSENT TO USE OF A FROZEN EMBRYO, EMBRYO AWARDED TO HUSBAND FOR SOLE PURPOSE OF DISPOSAL IN THIS DIVORCE ACTION (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff husband, in this divorce action, was entitled to the frozen embryo for the sole purpose of disposal:

… [Husband and wife] engaged the services of [New Hope Fertility Center, NHF] in the hope of conceiving a child via implantation of cryopreserved embryos in the wife’s uterus. … [T]hey signed an agreement with NHF entitled “Consent for the Cryopreservation of Human Embryo(s)” (the Consent Agreement). …

Paragraph 7 of the Consent Agreement is entitled “Voluntary Participation” and provides “I/We may withdraw my/our consent and discontinue participation at any time . . . .” Paragraph 16, entitled “Authorization,” provides, “This consent will remain in effect until such time as I notify NHF in writing of my/our wish to revoke such consent.” …

In Kass v Kass (91 NY2d 554 [1998]), the Court of Appeals determined that agreements between donors participating in IVF [in vitro fertilization] should be enforced pursuant to general rules of contract interpretation. … The Consent Agreement specifies that participation in the procedures involving cryopreservation of embryos is voluntary and that either party may withdraw consent at any time. … The provisions permitting either party to revoke consent are not limited to cryopreservation, but permit either party to withdraw consent to participation in the entire IVF process. … [T]he Consent Agreement does not indicate that the court has plenary authority to determine ownership of the embryo in the event of divorce … . Finkelstein v Finkelstein, 2018 NY Slip Op 03926, First Dept 6-5-18

​FAMILY LAW (IN VITRO FERTILIZATION, FROZEN EMBRYO, HUSBAND ENTITLED TO REVOKE HIS CONSENT TO USE OF A FROZEN EMBRYO, EMBRYO AWARDED TO HUSBAND FOR SOLE PURPOSE OF DISPOSAL IN THIS DIVORCE ACTION (FIRST DEPT))/CONTRACT LAW (FAMILY LAW, IN VITRO FERTILIZATION, FROZEN EMBRYO, HUSBAND ENTITLED TO REVOKE HIS CONSENT TO USE OF A FROZEN EMBRYO, EMBRYO AWARDED TO HUSBAND FOR SOLE PURPOSE OF DISPOSAL IN THIS DIVORCE ACTION (FIRST DEPT))/IN VITRO FERTILIZATION (FAMILY LAW. FROZEN EMBRYO, HUSBAND ENTITLED TO REVOKE HIS CONSENT TO USE OF A FROZEN EMBRYO, EMBRYO AWARDED TO HUSBAND FOR SOLE PURPOSE OF DISPOSAL IN THIS DIVORCE ACTION (FIRST DEPT))/EMBRYO, FROZEN (FAMILY LAW, IN VITRO FERTILIZATION, HUSBAND ENTITLED TO REVOKE HIS CONSENT TO USE OF A FROZEN EMBRYO, EMBRYO AWARDED TO HUSBAND FOR SOLE PURPOSE OF DISPOSAL IN THIS DIVORCE ACTION (FIRST DEPT))

PLAINTIFF’S FAILURE TO SATISFY A NON-MATERIAL CONDITION PRECEDENT DID NOT JUSTIFY THE AWARD OF SUMMARY JUDGMENT TO DEFENDANT (FIRST DEPT).

The First Department, reversing Supreme Court, determined the failure to satisfy a non-material condition precedent, which did not prejudice the defendant, did not justify summary judgment in favor of defendant:

It is undisputed that plaintiff failed to satisfy a condition precedent to recovering disputed costs for extra work on which defendant forced price reductions. Although plaintiff gave detailed written statements contesting defendant’s determinations of the fair and reasonable value of the extra work pursuant to section 8.01(B), it failed to give verified statements pursuant to section 11.03(A) of the contractual General Conditions.

Nevertheless, we conclude that plaintiff should be excused from the non-occurrence of that condition, because otherwise it would suffer a disproportionate forfeiture, and the occurrence of the condition was not a material part of the agreed exchange … . Defendant does not argue that plaintiff failed to document the costs of the claimed extra work, to provide timely notice of its claims for extra work, or to provide timely notice of its objections to defendant’s rejections of and price reductions on the claimed extra work. Nor does it contend other than in conclusory terms that plaintiff’s failure to submit verified written statements was prejudicial to it. Moreover, the cases on which defendant relies did not consider whether the failure to strictly comply with a condition precedent should be excused to avoid a disproportionate forfeiture under the circumstances of a case such as this, where the noncompliance is de minimis and defendant has shown no prejudice whatsoever … . Danco Elec. Contrs., Inc. v Dormitory Auth. of the State of N.Y., 2018 NY Slip Op 03935, First Dept 6-5-18

​CONTRACT LAW (PLAINTIFF’S FAILURE TO SATISFY A NON-MATERIAL CONDITION PRECEDENT DID NOT JUSTIFY THE AWARD OF SUMMARY JUDGMENT TO DEFENDANT (FIRST DEPT))/CONDITION PRECEDENT (CONTRACT LAW, PLAINTIFF’S FAILURE TO SATISFY A NON-MATERIAL CONDITION PRECEDENT DID NOT JUSTIFY THE AWARD OF SUMMARY JUDGMENT TO DEFENDANT (FIRST DEPT))

, ,

EMAIL DID NOT MEET THE REQUIREMENTS OF CPLR 2104 FOR AN OUT OF COURT STIPULATION OF SETTLEMENT, SETTLEMENT AGREEMENT NOT ENFORCEABLE (SECOND DEPT).

The Second Department determined the writing and execution requirements for an out-of-court stipulation of settlement were not met by an e-mail sent by the defendant in a slip and fall case:

To be enforceable, a stipulation of settlement must conform to the criteria set forth in CPLR 2104 … . Where, as in the instant case, counsel for the parties did not enter into a settlement in open court, an “agreement between parties or their attorneys relating to any matter in an action . . . is not binding upon a party unless it is in a writing subscribed by him or his attorney” … . The plain language of CPLR 2104 requires that “the agreement itself must be in writing, signed by the party (or attorney) to be bound” … . An email message may be considered “subscribed” as required by CPLR 2104, and, therefore, capable of enforcement, where it “contains all material terms of a settlement and a manifestation of mutual accord, and the party to be charged, or his or her agent, types his or her name under circumstances manifesting an intent that the name be treated as a signature” … .

Here, the email confirming the settlement agreement was sent by counsel for the party seeking to enforce the agreement, [defendant]. There is no email subscribed by the plaintiff, who is the party to be charged, or by her former attorney. In the absence of a writing subscribed by the plaintiff or her attorney, the settlement agreement is unenforceable against the plaintiff … . Kataldo v Atlantic Chevrolet Cadillac, 2018 NY Slip Op 03669, Second Dept 5-23-18

​CIVIL PROCEDURE (STIPULATION OF SETTLEMENT, EMAIL DID NOT MEET THE REQUIREMENTS OF CPLR 2104 FOR AN OUT OF COURT STIPULATION OF SETTLEMENT, SETTLEMENT AGREEMENT NOT ENFORCEABLE (SECOND DEPT))/STIPULATION OF SETTLEMENT (EMAIL DID NOT MEET THE REQUIREMENTS OF CPLR 2104 FOR AN OUT OF COURT STIPULATION OF SETTLEMENT, SETTLEMENT AGREEMENT NOT ENFORCEABLE (SECOND DEPT))/SETTLEMENT, STIPULATION OF (EMAIL DID NOT MEET THE REQUIREMENTS OF CPLR 2104 FOR AN OUT OF COURT STIPULATION OF SETTLEMENT, SETTLEMENT AGREEMENT NOT ENFORCEABLE (SECOND DEPT))/CPLR 2014 (STIPULATION OF SETTLEMENT, EMAIL DID NOT MEET THE REQUIREMENTS OF CPLR 2104 FOR AN OUT OF COURT STIPULATION OF SETTLEMENT, SETTLEMENT AGREEMENT NOT ENFORCEABLE (SECOND DEPT))/NEGLIGENCE (STIPULATION OF SETTLEMENT, EMAIL DID NOT MEET THE REQUIREMENTS OF CPLR 2104 FOR AN OUT OF COURT STIPULATION OF SETTLEMENT, SETTLEMENT AGREEMENT NOT ENFORCEABLE (SECOND DEPT))

, ,

DEFENDANT’S ALLEGED FAILURE TO REPAY MONEY PAID BY PLAINTIFFS PURSUANT TO A CONTRACT WHICH HAD BEEN TERMINATED STATED A CAUSE OF ACTION FOR CONVERSION, FRAUD IN THE INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED BECAUSE IT WAS BASED UPON NON-ACTIONABLE FUTURE EVENTS AND NON-ACTIONABLE OPINION ON THE PART OF THE DEFENDANT (FIRST DEPT).

The First Department determined plaintiffs’ cause of action for conversion should not have been dismissed and the cause action for fraud in the inducement was based upon non-actionable future conduct or events and non-actionable opinion. Plaintiffs hired defendant for extensive renovation work. Plaintiffs terminated the contract based upon defendant’s allegedly fraudulent requests for payment which were not used for the claimed purposes. When plaintiffs terminated the contract they demanded the return of $400,000 of the $840,000 they had paid. Defendant returned only about $85,000 and did not provide an accounting:

When plaintiffs terminated the contract mid-construction and demanded a return of $400,000 of the $840,000 they had paid, defendant allegedly returned only $84,622.65, without providing an accounting, and allegedly diverted the balance of such monies to his personal use. These allegations sufficiently state a cause of action for conversion … .

Plaintiffs’ cause of action alleging fraud in the inducement was properly dismissed, as it is founded upon non-actionable promises of future conduct or events, rather than present fact … and non-actionable opinion of defendant as to his entity’s resources and capability of undertaking the luxury renovation work sought by plaintiffs … . Yablon v Stern, 2018 NY Slip Op 03650, First Dept 5-22-18

​CONTRACT LAW (DEFENDANT’S ALLEGED FAILURE TO REPAY MONEY PAID BY PLAINTIFFS PURSUANT TO A CONTRACT WHICH HAD BEEN TERMINATED STATED A CAUSE OF ACTION FOR CONVERSION, FRAUD IN THE INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED BECAUSE IT WAS BASED UPON NON-ACTIONABLE FUTURE EVENTS AND NON-ACTIONABLE OPINION ON THE PART OF THE DEFENDANT (FIRST DEPT))/CONVERSION (DEFENDANT’S ALLEGED FAILURE TO REPAY MONEY PAID BY PLAINTIFFS PURSUANT TO A CONTRACT WHICH HAD BEEN TERMINATED STATED A CAUSE OF ACTION FOR CONVERSION, FRAUD IN THE INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED BECAUSE IT WAS BASED UPON NON-ACTIONABLE FUTURE EVENTS AND NON-ACTIONABLE OPINION ON THE PART OF THE DEFENDANT (FIRST DEPT))/FRAUD IN THE INDUCEMENT (DEFENDANT’S ALLEGED FAILURE TO REPAY MONEY PAID BY PLAINTIFFS PURSUANT TO A CONTRACT WHICH HAD BEEN TERMINATED STATED A CAUSE OF ACTION FOR CONVERSION, FRAUD IN THE INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED BECAUSE IT WAS BASED UPON NON-ACTIONABLE FUTURE EVENTS AND NON-ACTIONABLE OPINION ON THE PART OF THE DEFENDANT (FIRST DEPT))

, ,

ALTHOUGH A PARTY WHO SIGNS AN AGREEMENT IS USUALLY DEEMED TO HAVE READ IT, A RELATIONSHIP OF TRUST AND CONFIDENCE BETWEEN THE PARTIES MAY ALLOW ONE PARTY TO RELY ON THE ASSURANCES OF THE OTHER, A CERTIFIED BUT UNSIGNED TRANSCRIPT OF A DEPOSITION WAS ADMISSIBLE BECAUSE IT HAD BEEN TIMELY MAILED TO OPPOSING COUNSEL (FIRST DEPT).

The First Department determined, although the usual rule is one who signs an agreement is deemed to have read it, the rule may not apply when there is a relationship of trust and confidence between the parties and reliance on the assurances of a party (here the parties to a trust agreement were father and son). Plaintiff alleged he was fraudulently induced to sign the agreement. The court noted that a certified, unsigned transcript of a deposition was admissible because the transcript had been mailed to opposing counsel more than 60 days before the motion was brought:

Plaintiff’s claim … is that defendant led him to believe that the documentation that defendant presented for his signature (a trust agreement and two deeds) was for the conveyance of [one condominium unit] only. In fact, the paperwork provided for the conveyance of [two condominium units] to the trust. Ordinarily a person is bound by the terms of an instrument he or she signs, and may not claim to have justifiably relied on false representations concerning the contents of a document that he or she failed to read without valid excuse … . In this case, however, whether this principle applies to bar plaintiff’s fraudulent inducement claim … cannot be determined as a matter of law because plaintiff alleges that he and defendant, his son, had a relationship of trust and confidence … . Tsai Chung Chao v Chao, 2018 NY Slip Op 03620, First Dept 5-17-18

​CONTRACT LAW (ALTHOUGH A PARTY WHO SIGNS AN AGREEMENT IS USUALLY DEEMED TO HAVE READ IT, A RELATIONSHIP OF TRUST AND CONFIDENCE BETWEEN THE PARTIES MAY ALLOW ONE PARTY TO RELY ON THE ASSURANCES OF THE OTHER, A CERTIFIED BUT UNSIGNED TRANSCRIPT OF A DEPOSITION WAS ADMISSIBLE BECAUSE IT HAD BEEN TIMELY MAILED TO OPPOSING COUNSEL (FIRST DEPT))/FRAUD (FRAUDULENT INDUCEMENT, ALTHOUGH A PARTY WHO SIGNS AN AGREEMENT IS USUALLY DEEMED TO HAVE READ IT, A RELATIONSHIP OF TRUST AND CONFIDENCE BETWEEN THE PARTIES MAY ALLOW ONE PARTY TO RELY ON THE ASSURANCES OF THE OTHER, A CERTIFIED BUT UNSIGNED TRANSCRIPT OF A DEPOSITION WAS ADMISSIBLE BECAUSE IT HAD BEEN TIMELY MAILED TO OPPOSING COUNSEL (FIRST DEPT))/CIVIL PROCEDURE (A CERTIFIED BUT UNSIGNED TRANSCRIPT OF A DEPOSITION WAS ADMISSIBLE BECAUSE IT HAD BEEN TIMELY MAILED TO OPPOSING COUNSEL (FIRST DEPT))/DEPOSITIONS (A CERTIFIED BUT UNSIGNED TRANSCRIPT OF A DEPOSITION WAS ADMISSIBLE BECAUSE IT HAD BEEN TIMELY MAILED TO OPPOSING COUNSEL (FIRST DEPT))

,

PARTIES’ CONDUCT AFTER THE PURPORTED TERMINATION OF THE SHAREHOLDERS’ AGREEMENT COULD INDICATE THE PARTIES INTENDED THE CONTRACT TO CONTINUE (IMPLIED CONTRACT), DEFENDANT’S MOTION TO DISMISS THIS BREACH OF CONTRACT ACTION SHOULD NOT HAVE BEEN GRANTED (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the parties’ conduct after a purported termination of a shareholders’ agreement could indicate the parties intended the contract to continue (an implied contract). Defendant’s motion to dismiss this breach of contract action should not have been granted:

“On a motion to dismiss pursuant to CPLR 3211, we construe the pleadings liberally, accept the allegations in the complaint to be true, give [the] plaintiff[] the benefit of any favorable inferences and ‘determine only whether the facts as alleged fit within any cognizable legal theory'”… . Supreme Court held that defendant could not have breached the shareholders’ agreement in 2016, as the agreement explicitly terminated when he became the “only . . . remaining [s]hareholder” of the dealerships in 2007. It is true that “[w]hen a contract is terminated, such as by expiration of its own terms, the rights and obligations thereunder cease” … . Nevertheless, “the conduct of parties to a contract following its termination may demonstrate that they intended to create an implied contract to be governed by the terms of the expired contract, and whether there was a ‘meeting of the minds’ required for formation of such an enforceable agreement is generally a question of fact” … . It is undisputed that defendant continued to make monthly payments as required by the shareholders’ agreement after the shares were conveyed, and this ongoing compliance with the agreement’s terms required further inquiry into “the conduct of the parties to determine whether the terms of the [shareholders’ agreement] continue[d] to apply” … . Supreme Court accordingly erred in concluding, as a matter of law, that defendant could not have breached the terms of the shareholders’ agreement due to its termination. Harris v Reagan, 2018 NY Slip Op 03408, Third Dept 5-10-18

​CONTRACT LAW (PARTIES’ CONDUCT AFTER THE PURPORTED TERMINATION OF THE SHAREHOLDERS’ AGREEMENT COULD INDICATE THE PARTIES INTENDED THE CONTRACT TO CONTINUE (IMPLIED CONTRACT), DEFENDANT’S MOTION TO DISMISS THIS BREACH OF CONTRACT ACTION SHOULD NOT HAVE BEEN GRANTED (THIRD DEPT))/CIVIL PROCEDURE (MOTION TO DISMISS, PARTIES’ CONDUCT AFTER THE PURPORTED TERMINATION OF THE SHAREHOLDERS’ AGREEMENT COULD INDICATE THE PARTIES INTENDED THE CONTRACT TO CONTINUE (IMPLIED CONTRACT), DEFENDANT’S MOTION TO DISMISS THIS BREACH OF CONTRACT ACTION SHOULD NOT HAVE BEEN GRANTED (THIRD DEPT))/CPLR 3211(PARTIES’ CONDUCT AFTER THE PURPORTED TERMINATION OF THE SHAREHOLDERS’ AGREEMENT COULD INDICATE THE PARTIES INTENDED THE CONTRACT TO CONTINUE (IMPLIED CONTRACT), DEFENDANT’S MOTION TO DISMISS THIS BREACH OF CONTRACT ACTION SHOULD NOT HAVE BEEN GRANTED (THIRD DEPT))/IMPLIED CONTRACT (PARTIES’ CONDUCT AFTER THE PURPORTED TERMINATION OF THE SHAREHOLDERS’ AGREEMENT COULD INDICATE THE PARTIES INTENDED THE CONTRACT TO CONTINUE (IMPLIED CONTRACT), DEFENDANT’S MOTION TO DISMISS THIS BREACH OF CONTRACT ACTION SHOULD NOT HAVE BEEN GRANTED (THIRD DEPT))

, , ,

ALTHOUGH THE DEFENDANT NEW YORK COMPANY IS A WHOLLY OWNED SUBSIDIARY OF AN ISRAELI COMPANY, THE TWO ENTITIES OPERATED INDEPENDENTLY SUCH THAT NEW YORK COULD NOT EXERCISE JURISDICTION OVER THE ISRAELI COMPANY, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT).

The First Department found that a defendant company, IAI, which operates in Israel, was not subject to personal jurisdiction in New York under the theory that defendant IAINA, which operates in New York, was a department of IAI. The court explained the relevant criteria. The court further held that a common interest privilege (with respect to alleged defamatory remarks regarding the plaintiff, defendant IAINA’s employee) does not insulate defendant from the alleged breach of a contractual non-disparagement clause:

Defendants established that IAI North America, Inc. (IAINA), which does business in the State of New York, is not a mere department of IAI, which operates primarily in Israel, and therefore that jurisdiction over IAINA is not jurisdiction over IAI … . The key executive personnel of the subsidiary were not assigned to their positions by the foreign parent, the subsidiary trained its own personnel, the parent did not write and publish all of the sales literature used by the subsidiary, and the subsidiary prepared its own financial statements … . … While IAINA is a wholly owned subsidiary of IAI, common ownership is “intrinsic to the parent-subsidiary relationship and, by [itself], not determinative”… . IAINA showed that it observed corporate formalities. Nothing in plaintiff’s affirmation indicates that IAI interferes in the selection and assignment of IAINA’s executive personnel, and the CEO of IAINA denied this. He also denied that IAI controlled IAINA’s marketing and operational policies. Plaintiff claimed that IAI had control over the approval of IAINA’s annual budget during the 11 years he worked at IAINA. However, this does not suffice … . …

IAINA … contends that the cause of action for breach of a non-disparagement clause should be dismissed because, even if it made disparaging remarks about plaintiff (its former employee), the remarks were privileged. However, the common interest privilege it relies on — which is part of the law of defamation — does not apply to a claim for breach of a non-disparagement clause … . Wolberg v IAI N. Am., Inc., 2018 NY Slip Op 03321, First Dept 5-8-18

CIVIL PROCEDURE (ALTHOUGH THE DEFENDANT NEW YORK COMPANY IS A WHOLLY OWNED SUBSIDIARY OF AN ISRAELI COMPANY, THE TWO ENTITIES OPERATED INDEPENDENTLY SUCH THAT NEW YORK COULD NOT EXERCISE JURISDICTION OVER THE ISRAELI COMPANY, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/JURISDICTION (CIVIL PROCEDURE, CORPORATIONS, ALTHOUGH THE DEFENDANT NEW YORK COMPANY IS A WHOLLY OWNED SUBSIDIARY OF AN ISRAELI COMPANY, THE TWO ENTITIES OPERATED INDEPENDENTLY SUCH THAT NEW YORK COULD NOT EXERCISE JURISDICTION OVER THE ISRAELI COMPANY, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/CORPORATIONS (JURISDICTION, ALTHOUGH THE DEFENDANT NEW YORK COMPANY IS A WHOLLY OWNED SUBSIDIARY OF AN ISRAELI COMPANY, THE TWO ENTITIES OPERATED INDEPENDENTLY SUCH THAT NEW YORK COULD NOT EXERCISE JURISDICTION OVER THE ISRAELI COMPANY, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/DEFAMATION (NON-DISPARAGEMENT CLAUSE, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/QUALIFIED PRIVILEGE (DEFAMATION, NON-DISPARAGEMENT CLAUSE, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/NON-DISPARAGEMENT CLAUSE (DEFAMATION, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/CONTRACT LAW (DEFAMATION, NON-DISPARAGEMENT CLAUSE, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/PRIVILEGE (DEFAMATION, COMMON INTEREST,  A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))/COMMON INTEREST PRIVILEGE (DEFAMATION, A QUALIFIED PRIVILEGE RE DEFAMATORY REMARKS ALLEGEDLY MADE BY DEFENDANT DOES NOT INSULATE THE DEFENDANT FROM A CAUSE OF ACTION BASED UPON BREACH OF A CONTRACTUAL NON-DISPARAGEMENT CLAUSE (FIRST DEPT))

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2026 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy